How Far Will Your Money Go At Today’s Rates?
Amortization schedules, 2.5 per cent five-year, closed rate, bi-weekly payments… you might know all these mortgage terms by now, but have you sat down and figured out how much condo or house your money will buy?
With the help of our mortgage calculator, it’s easy to figure out! We’re going to go through a little exercise using a five-year mortgage rate as an example. We’re choosing that term because about 90 per cent of our first-time buyer ‘Clients For Life’ opt for it. They tend to enjoy the added security of knowing what their mortgage rate will be for five years.
We’re also going to base the example on a 25-year amortization schedule, which means that it would take 25 years to pay off your mortgage. This is also the most common choice among our “first-timers.”
We’ll have to pick a rate for example purposes, but you can check on current rates on the mortgage rates page at YourMortgageWatch.ca. Keep in mind that we have ties with mortgage professionals who routinely shave an entire percentage point or more from the bank’s posted rate for our ‘Clients For Life.’ If you’re a good negotiator, you may be able to negotiate this yourself with your branch manager.
We’re going to choose a five-year rate of 2.5 % for our example.
Well, now that we’ve established the rate and the amortization, let’s look at different mortgage amounts and what they cost monthly. A $100,000 mortgage would cost you… drum roll please… $456 a month in principal and interest payments (a fancy way of saying the WHOLE mortgage payment.)
Did you expect that figure to be much, much higher? Sometimes our buyers are shocked to learn just how far their money will go. Perhaps some of you have heard horror stories from leading-edge Baby Boomers who paid 16, 17 or 18 per cent for mortgages in the early ‘80s.
For argument’s sake, a $100,000 mortgage at 17 per cent costs $1,437.80 a month. That number is even more shocking when you compare it to the monthly cost for a $400,000 mortgage at today’s available rate—$1,841.
To add yet another bit of perspective to these figures, for many of our first-time buyers, that mortgage payment of $1,841 monthly is not much more than the rent that they already pay -- and sometimes it’s less. Is it less than what you pay?
We don’t want to mislead you, though. You must still add expenses such as realty taxes, utilities, condo maintenance fees, insurance and the like to your monthly mortgage payment when you buy your own home, but you’re also building equity. And you don’t have to face yearly rent increases!
If what you’ve just read intrigues you and you’d like to know more about what you can and can’t afford, you can ask us about our free mortgage analysis—connect with us online or by phone and we will get back to you about which mortgage suits your needs best.
Get your free Mortgage Consultation analysis by calling George Christopoulos at 416-721-9299 Extension 221 OR online at GeorgeChristopoulos.ca/how-to-apply-mortgage.
You can call us any time directly with your mortgage questions, or you can drop him an email to George@YourMortgageWatch.ca.